Investors Think Deere (NYSE:DE) as a classic American heartland company, but it’s also under-the-radar robotics and artificial intelligence (AI) stocks. This may sound surprising, but you don’t have to take my word for it, it’s a top 10 holdings at Cathie Wood’s ARK Autonomous and Robotics Technology ETF (Bats: ARKQ)just above the high-profile stocks that are synonymous with AI like Nvidia (NASDAQ:NVDA) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL).
Best of all, Deere isn’t just an understated product of high-tech robotics and artificial intelligence; it is one that is trading at a very acceptable valuation as the market does not yet seem to appreciate this aspect of the company. This is why Deere stock looks like an attractive long-term investment.
robots on the farm
Believe it or not, Deere is a 186-year-old company, but that doesn’t mean you can’t teach an old dog new tricks. Today, Deere is at the forefront of technologies like robotics and autonomous vehicles.
Deere is the world leader in farm machinery: it is well known for its iconic eco-friendly tractors, as well as other farm equipment. You may have even seen Deere ride-on mowers. It also serves the construction and forestry end markets with products such as bulldozers, excavators, and timber harvesting equipment. Many industries are becoming more automated with advances in robotics and artificial intelligence, and Deere’s end markets are no different.
It’s not just bells and whistles or an effort by Deere to fit a few buzzwords into its marketing material. The world’s population is growing, recently surpassing 8 billion, which means that the world’s farmers will need to produce more food than ever before to support this growing population. Deere’s high-tech robotic and autonomous equipment helps farmers operate more efficiently by lowering operating costs, reducing waste, reducing the need for labor and increasing crop yields.
Examples include Deere’s See & Spray technology, which uses high-resolution cameras and image recognition to tell the difference between weeds and cultivated plants, so you can spray herbicide only on weeds, thereby reducing product use. chemicals and reducing costs for farmers.
Meanwhile, the company’s new ExactShot technology cuts waste (and cost) by reducing fertilizer use, spraying individual seeds with fertilizer instead of just spraying an entire row of them.
In 2022, Deere unveiled fully self-driving self-driving tractors at CNET’s CES 2022. Deere’s autonomous product portfolio also includes autonomous sprayers and autonomous drone sprayers. All of these products help farmers work more efficiently and do more than less.
Deere has also been busy acquiring a number of AI and robotics startups in recent years, from the $305 million acquisition of Silicon Valley startup Blue River Technology in 2017 to smaller deals like the 2021 acquisition of the Silicon Valley startup AgTech Bear Flag Robotics and its March 2023 acquisition of SparkAI.
Bargain Container Valuation
Despite these impressive gains, Deere shares are trading fairly low. The shares are trading at just 14.4 times earnings, a deep discount to the broader market, where the average multiple of the S&P 500 (SPX) is around 24. The stock is even cheaper going forward, trading at 12.6 times forward earnings.
Stocks like Deere and Caterpillar (NYSE:CAT) are trading at lower valuations right now because there is a lot of uncertainty in the global economy, particularly in capital-intensive sectors like agriculture and construction, which are key end markets for Deere, but this discount looks too cheap. .
In addition, Deere had a median price-earnings ratio of 20.5 times earnings from fiscal 2018 through 2022, so in addition to being attractive compared to the S&P 500, the stock is also cheap compared to its peers. own historical standards.
Is DE Stock a Buy, According to Analysts?
Analysts also see value in Deere’s stock. The stock enjoys a Moderate Buy consensus rating from analysts, and the average price target for DE shares $470.15 represents a growth potential of 25.1%. Of the 14 analysts covering Deere, nine have a Buy rating and five have a Hold rating.
Besides, Deere Presents a Favorable Smart Score of 8 out of 10. Smart Score is TipRanks’ proprietary quantitative stock scoring system that evaluates stocks on eight different key market factors. The result is based on data and does not require any human intervention. A Smart Score of 8 or higher equals an Outstanding Performance rating.
Looking to the future
At a time when the market is hungry for all things artificial intelligence and robotics, Deere is a quiet leader in these fields, using these technologies to help the world’s farmers become more productive and efficient. While many technology companies and stocks associated with robotics or AI are trading at sky-high valuations or not even profitable at all, Deere is profitable and trading at a very modest valuation.
I believe that as Deere’s recognition as a leader in artificial intelligence, robotics and automation technology grows, the market will appreciate the stock more and give it a higher multiple.
Additionally, while a yield of 1.3% doesn’t make Deere a stock to excite dividend investors, it’s reassuring to know that the company has paid an annual dividend for 33 consecutive years.
Based on these factors, plus favorable analyst ratings for Deere and Smart Score, I think the stock looks promising over the long term.